Alphabet (GOOGL) stock is struggling for direction Tuesday after a U.S. federal judge ruled Monday that Google has unlawfully maintained a monopoly in search and text advertising. Shares of Alphabet, which owns the search engine, were last seen marginally higher after sinking more than 4% in Monday's market meltdown.
"After having carefully considered and weighed the witness testimony and evidence, the court reaches the following conclusion: Google is a monopolist, and it has acted as one to maintain its monopoly," wrote Judge Amit Mehta of the U.S. District Court for the District of Columbia in his ruling.
The suit was originally filed in 2020 and the ruling is the first anti-monopoly decision against a technology company in decades, according to CNBC. The ruling focused on Google's exclusive search arrangements with Android and Apple smart devices, which "helped to cement Google's anticompetitive behavior and dominance over the search markets," it added.
"This victory against Google is an historic win for the American people," said U.S. Attorney General Merrick Garland in a statement. "No company – no matter how large or influential – is above the law. The Justice Department will continue to vigorously enforce our antitrust laws."
Alphabet does not agree with the court's decision.
"This decision recognizes that Google offers the best search engine, but concludes that we shouldn't be allowed to make it easily available," said Alphabet President of Global Affairs Kent Walker in a statement, adding that the company will appeal the decision.
What should Alphabet investors make of the Google ruling?
Alphabet has kept up the pace on the price charts relative to its fellow Magnificent 7 stocks. For the year to date, GOOGL stock is up more than 14%. And Wall Street thinks the communication services stock has more room to run.
According to S&P Global Market Intelligence, the average analyst target price for GOOGL stock is $205, representing implied upside of nearly 30% to current levels. Additionally, the consensus recommendation is a Buy.
Financial services firm Needham is one of the more bullish outfits on GOOGL stock with a Buy rating and $210 price target.
"GOOGL is our top large-cap stock pick for 2024, owing to a stronger macro backdrop, record political ad spending, data advantages, and Generative AI integrations (which lowers operational expenditures and drive revenue upside)," says Needham analyst Laura Martin.
As for the antitrust ruling against Google, Martin says that "investors anticipated this outcome" and anticipates a "minimal near-term impact" on the stock. "We believe consumers give Google Search its monopoly, so even without its exclusive contracts, consumers will download the Google app and its Search market share won't change materially," she adds.
